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how to make everything perfect forever

Many moons ago, I was assigned to read Steven Landsburg’s The Armchair Economist, in which he makes some “modest proposals” about law and government. One such proposal (which he credited to Alan Stockman) was that politicians be allowed to make legally binding promises. For instance, if you’d care to re-create Papa Bush’s “Read My Lips” pledge, you’d have the opportunity to make it legally enforceable. If you do, then the public has something to hold over your head. If you don’t, then you’re all talk and the public will take that into consideration when voting.

I love this ideer. We’d have to iron out the details of how to make these promises legally binding. Maybe we could develop a type of contract under federal law such that violation would constitute a “high crime and misdemeanor” and would therefore be impeachable. States could develop laws that would keep those who break these promises off all future ballots. A political party could make its nominees and officeholders sign contracts such that violation would mean no support from the party in the upcoming election. The point is that we’d have one more way to hold politicians responsible for broken promises, incorrect predictions, and falsehoods instead of having to wait for the next election to make them suffer.

Landsburg’s proposal came to mind because of the $10,000 bet that Mitt Romney offered Rick Perry in yesterday’s debate. Maybe the bet was a rhetorical flourish, as the Romney camp is claiming today. Maybe it shows that Romney’s out of touch with average Iowans, as the Perry camp is claiming today. Maybe they’re both idiots, as the Democrats are claiming today. These very real possibilities are entirely beside the point.

Why not let these guys make this sort of bet? Why not encourage them to make this sort of bet? Wouldn’t it be one more way to keep them honest? Wouldn’t it put pressure on them to be more precise and accurate with their statements? I think that at the very least, they’d become less grandiose and more realistic in their pronouncements, and they’d be more careful about sliming their opponents.

Besides, wouldn’t the gambling angle draw more attention to debates, campaigns, lawmaking, etc.? Pundits, professors, and politicians often chastise Americans for not paying enough attention to matters of state– well, I assure you that moving the debates to casinos and allowing bookies in the hallowed chambers of Congress will fix that. Heck, we can even find a way to incorporate these bets into state and regional lotteries. That‘ll get folks paying attention to the campaigns, and holding politicians’ feet to the fire.

One of the issues many state and municipal governments are facing is that of pensions for public employees. Wisconsin, you may have heard, is having itself a minor kerfluffle over the matter as we speak.

Some folks say that the problem is that public pensions are woefully underfunded; that governments aren’t collecting enough tax revenue to pay for them. Other folks say that the problem is that the pensions are– or soon will be– unsustainably large.

This leads to a whole bunch of arguments, such as: Should taxes be raised? If so, how much and on whom? Should other expenditures be cut to provide the money to fund these pensions? If so, which programs? How much? And then, of course, there’s the politically suicidal question of whether the pensions themselves should be cut, and if so, how much.

These are not fun conversations to have. These are not simple conversations to have. But the fact remains that various governments promised that pensions would be paid, and they’ve got to keep those promises (or, if you’re really sneaky, find politically acceptable way to break them).

But I must ask: why make a promise that’s so tough to keep–especially if you don’t have to? Paying pensions to current and past employees is one thing, but do state and local governments have to keep promising pensions to new employees?

No, they don’t. Therefore I make the following proposal, which will simplify state and local government finances:

No state or local government should offer pensions to any new employee. Take whatever cash the government would have put away into a pension fund and give it directly to the employee as additional wages or salary. The employees will have the freedom to spend those extra dollars as they see fit, which might include investment in a retirement plan.

There would be big political problems with my proposal. Some folks don’t know how to handle their money, and would inevitably whine about being broke when they retire. Oh well. Some current employees would complain that it somehow isn’t fair that new employees have this option but they don’t. Too bad. Governments might complain that switching over to a new system is too complicated and blah blah blah. Get over it.

There’s a huge upside (in my book): there’s one less future obligation that states and local governments have to worry about keeping. They would be forced to focus on cash flow now instead of trying to attract new employees with deferred compensation that some future generation would have to take care of. And there’d be less discussion about who really funds pensions (i.e., who bears the burden of pension funding, which is different economically than it is accounting-wise). In Wisconsin there is great concern over the prospect of teachers having to contribute 5.8% towards their pensions– under my proposal, new teachers, new cops, new firemen, etc., would have extra salary (which, remember, is the cash that governments are supposed to be putting into pension funds anyways) and would be 100% responsible for their own retirement, if that’s how they choose to spend their money.

I think this would clarify finances for states and municipalities. My proposal wouldn’t take a current-year fiscal deficit and instantly turn it into a surplus–that’s not the point. The point is that this would clarify finances for states and municipalities, by removing the factor of future payments (pensions). No more of this economically meaningless nonsense over what percentage whoever should contribute towards pensions. Just two nice, simple questions: do we have enough to pay our employees, yes or no? If so, great. If not, do we raise taxes or make cuts?

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In order to simply the discussion as much as possible, I left out any mention of insurance plans. But we could make a similar proposal about various forms of insurance. I think all these forms of payment aside from salary have overcomplicated government finances and fostered– perhaps deliberately– economic ignorance.

In a comment on “Bash,” “Blonde” asked the question, “What sort of healthcare do you think is desirable for the United States? Certainly not what we have now?”

I was strongly tempted to write, “Everyone should be taxed in order to pay for all the health care I want,” and then use the ensuing discussion to point out the problems with that statement and, by extension, with socialized health insurance. However, that approach relies on people actually reading this, so I’d best be a little more direct.

I think the government should have as little as possible to do with health care beyond enforcing contracts, property rights, truth-in-advertising, and anti-fraud legislation—in short, treat it no differently than any other sector of the economy. I might make an exception for epidemic control, but I’m not sure the government’s especially good at handling that.

That said, here’s a short list of what I think the feds and the states should do regarding health insurance:

Step One: Allow interstate commerce in health insurance. For decades, you could only buy health insurance from companies in your own state, which weakened competition within the industry and put upward pressure on prices. The ability to buy health insurance from anywhere in America would make the industry more competitive and put downward pressure on prices.

Step One has an additional advantage. If health insurance companies could set up shop in any state, then they’d likely flock to the states that have the fewest rules and regulations about what health insurance plans must cover. That may not sound like an advantage, but there are a lot of people out there who have to buy plans that offer coverage they don’t need or want. Step One gives them a greater opportunity to find health insurance plans that cater to their needs.

True story: earlier this week, I had lunch my friend “Lego” and the discussion turned to “ObamaCare” and the need for national health insurance, or for government involvement in healthcare. Lego, a supporter of ObamaCare, lamented that a few years ago he was between jobs and he needed health insurance for himself, his wife, and their newborn son. His best insurance option was a plan with X, Y, and Z for $800 (if I remember correctly) a month. He didn’t need or want Y or Z, and wished he could have bought a plan that only covered X for, say, $300 or $400 a month. I cut him off and told him that state mandates forbade him from doing that. It was an object lesson in irony; I wish more people had seen it happen.

Step Two: Give individuals the same tax incentives to buy health insurance that companies already have. It would have made Lego’s life a lot easier a few years back. Plus, many people would prefer to have their employers pay them the extra wages or salary instead of giving them the company’s health care plan, and then go out and find a plan more suitable to their needs and wants.

Step Three: Eliminate all federal laws and regulations that specifically affect the health care industry. That includes doctors, nurses, insurance companies, pharmaceuticals, designers of medical equipment, emergency responders, etc. It shouldn’t be regulated any more or less heavily than any other industry.

Step Four: Establish a legal distinction between “health insurance” and “health transfer payments.” Why? Because forcing insurance companies to pay for pre-existing conditions is not insurance. It’s a form of “health welfare”; it’s forcing them to give you money from a risk pool that you haven’t paid into. It’s akin to buying fire insurance after your house burns down and then demanding that the company cover your losses. If we recognize and emphasize the difference between the two, if we can separate the two issues, the people can focus more clearly on how to manage them.

Step Five: Phase out Medicaid and/or Medicare. Ultimately they are promises that cannot be kept. Medicaid threatens the long-term fiscal stability of the government more than Medicare does, but neither is sustainable.

Step Six: (This will sound crazy. It isn’t.) States should lower the qualifications to be doctors, allow construction of more medical schools, and review (with an eye towards reduction) the legal distinctions between nurses, nurse practitioners, doctors, and other medical professionals. Why? Simple: it will make more doctors available and put downward pressure on prices. “But the extra doctors won’t be as good!” True, but as with all other products, there are people who prefer to sacrifice quality for price. Furthermore, people would be more likely to visit the “extra” doctors for relatively simple matters, freeing up the more qualified doctors for more complicated matters. There’s greater room for specialization, which is generally positive. Regarding the legal distinctions, consider: How much time, money, effort and life is wasted waiting for an answer or procedure from a doctor when you could get the same answer or procedure from a nurse?

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Right about now, an astute reader would note that I didn’t actually offer any solutions. That was deliberate. I believe in Dr. Sowell’s maxim that “There are no solutions, only trade-offs.”

In response to this non-solution, some might ask, “But what about people who face bankruptcy because of high medical bills?” “But what about people with pre-existing conditions?” “But what about people who don’t know how to take care of themselves?”

These are good questions. Here’s my response:

I can’t design and enforce a healthcare program for 310 million Americans that would be more efficient and effective than letting those 310 million Americans—individuals, families, employers, religious groups, private charities, health insurers, doctors, hospitals, etc.—buy, sell, and manage their own healthcare. Neither can Obama, or Pelosi, or Reid, or the staffers who wrote the legislation, or any team of experts. Heck, Romney and his experts couldn’t do it for just 6.5 million people in Massachusetts. Show me socialized healthcare, and I’ll show you inefficiency that brings the entire government closer and closer to bankruptcy.

We didn’t have anything even remotely like national health insurance until 1965—and yet every single statistical indicator of health had been improving throughout our history. It’s only since the advent of Medicaid, Medicare, and greater government involvement in healthcare that the fiscal health of our government, and by extension the entire country, has been threatened. We’ve gotten the same improvements we had before, but at several times the cost.

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In short, I think free markets in health care are most desirable for the United States and for any other country. Fire away.

In my unceasing effort to make the world a much better place, I hereby offer the following:

Say your senator gets elected President or nominated to be Secretary of State. How do you replace him? Or her? Either you have a special election or, more commonly, your state’s governor chooses the replacement. But what if your governor tries to sell the seat? Or chooses the cwown pwincess of America’s woyal famiwy because he thinks there’s a legacy-preference policy?

Say your representative is giving a speech in front of the entire House of Representatives about the need for a new continuity-of-government plan in case of a mass-casualty disaster. Say the roof caves in, killing everyone. How do you replace them? Four hundred thirty-five special elections. Meanwhile, though nobody can tell the difference, the federal government flounders without half its legislature.

Each congressman (or –woman, or –person) should have a designated replacement in case of his (or her, or—you get the idea) death, resignation, or removal from office. Therefore I humbly suggest that the 28th Amendment to the Constitution of the United States should require the election of Vice-Senators and Vice-Representatives.

Candidates would run on tickets, like the President and Vice-President do. Congress would decide how much or whether to compensate them, how much classified information Vice-Sens and Vice-Reps would be privy to, and whether they are permitted within a potential blast-zone radius of the Capitol when Congress is in session. If the vice-congressman has to step up to the real job, then the state legislatures create legislation to determine how to fill the vice-vacancy.

Think about that: if your senator resigns so he can go play President, your bribe-seeking, Lego-haired governor will have nothing to say about his replacement.

If your senator resigns and her replacement’s only qualification is that she’s the last sober Kennedy, at least it’ll be the voters’ fault instead of the governor’s.

And if hundreds of Congressmen are killed in an attack or, more likely, rounded up in a huge RICO sting, we’ll immediately know who’ll replace them. In the face of disaster, we can be confident that a fully functioning Congress is ready to serve us exactly as well as it always has.

4 Comments

Doctor Hmnahmna

12 January 2009 9:21 pm

Re RICO: So, what’s triple damages on a FY 10 $1.2 trillion deficit fueled largely by bailout after bailout, not to mention an actual debt of $10.2 trillion or future obligations for Social Security and Medicare?

I don’t think I can count that high.

Yes, Dom, I know it’s $3.6 trillion on the deficit portion, but I digress …

Vincent Viscariello

I was watching Jack Cafferty on CNN today, and the topic was Congressional salaries and pensions. The commentators were complaining about the fact that Congress has a cushy retirement system and guaranteed salaries for itself while in the private sector—where the bottom line matters—salaries and pensions are not nearly as secure, and people worry about their retirement.

Furthermore, Congressmen are compensated no matter how big the annual deficit is, or how big the national debt gets. I think that’s what irks most people about congressional compensation. If the feds lose money in a given year, no Senator or Representative will get fired over it.

Now, I don’t care that much about the debt or the deficit (where “that much” = how much I care about the percentage of GDP controlled by the feds, currently around 20%). But as long as most other people are going to whine about the debt and the deficit, then I humbly put forth the following proposal–which is probably not original, but I wouldn’t know who to credit:

Currently, regular Senators and Representatives earn $165,200 a year, and after five years of “service,” they qualify for a pension (about $3,900 per month, if I remember correctly). I don’t know if that’s too much, not enough, or just right, but I do know that those numbers are in no way attached to whether the federal budget is in surplus or deficit. So if we want to put real pressure on these guys to run a surplus every year and reduce the debt, we need to connect their salaries to their fiscal performance—as in the private sector.

We should exclude Congressional salaries and pensions from the budgeted expenses, and pay Congressmen a fixed percentage of the surplus. In other words, salaries and pensions would be paid only after every other expense of the federal government had been paid—if they run a deficit, no salary. No pension.

Let’s pretend that Congressmen would have to evenly split one percent of the surplus. It may not seem like much; we can tinker with the percentage later. If they want to earn the same salaries they’re earning now, they’d have to run a surplus of almost $9 billion per year. If they want salaries of $1 million per year, which is fine by me, they’d have to run a surplus of $53.5 billion per year. The bigger the surplus, the bigger the paycheck. That multi-trillion dollar national debt would shrink pretty darned fast.

A constitutional amendment along these lines would be nice, but perhaps not necessary: Congress sets its own compensation by law. What would keep them from creating a surplus by raising taxes too high? Elections.Recalls.Vetoes.Humiliation.Public thrashings with canes, if necessary. What about unexpected expenses, like a $40 billion military appropriation after a terrorist attack? Well, budget carefully. Have contingency funds ready. There would be dozens of other details to iron out, such as making sure that even “off-budget” expenses and revenues are included in the equation.

This proposal should be taken with a grain of salt; I really don’t think that the size of the surplus, deficit or debt matter as much as the levels of federal spending or taxation. But the principle remains: if we really want to eliminate or reduce the debt, then financial compensation needs to be tied to financial performance.